But details still are secret
New tax proposals coming 'within a month'

By the A.M. Costa Rica staff

Top ministers held a strategy session Monday to figure out how to get a
new tax plan passed in the Asamblea Legislativa.

A communique issued after the session said that the plan might go to
the legislators within a month.

Little is known about the contents of the plan except that the measure
is more streamlined than the 400-plus-page document promoted by the
Abel Pacheco administration over the last four years. That document,
the bipartisan product of a handful of ex-budget ministers, suffered a
reverse when the Sala IV constitutional court ruled that legislative
leaders rammed the document through the assembly in an unconstitutional
way.

The new plan is expected to have at least a proposal for a value-added
tax that would be equal to the 13 percent collected in sales tax now.
The value-added tax would raise more money because more activities,
such as professional work, would be covered.

The ministers who met were Guillermo Zúñiga of the budget
ministry Hacienda, Francisco de Paula Gutiérrez, president of
the Banco Central, and Marco Vargas, who is minister of
Coordinación Interinstitucional, a new job.

Vargas said in the communique that an exact date to send the document
to the legislature is not fixed but that it will be a short time, a
month at the most.

Vargas said that what is needed is a fiscal plan that is defensible and
acceptable to all the parties represented in the assembly. For
the last four years Movimiento Libertario used parliamentary procedures
and thousands of separate amendments and motions to stall the
fiscal plan.

In order to get the document approved, legislative leaders had to
resort to a fast track procedure that the high court found
insufficient. The Libertarians faced a lot of public and official
pressure to withdraw their opposition.

Zúñiga, in the communique, said that the plan would first
be presented to the legislature and later to other interested groups in
society. He said all suggestions and motions would be accepted, but it
is hard to see the mechanism for that because the plan by then would be
in the hands of the lawmakers.

The country needs to face the structural problems of public funding,
Zúñiga said. He cited tax fraud, financing the country's
massive internal and external debt and public spending.

No matter what the executive branch proposes, the result, if passed,
may be very

A.M. Costa Rica
graphic

The fiscal plan process to begin
again

different because the legislature has the power to redraft
the bill.

Zúñiga also said that there are other projects of high
importance in
the legislature, including a redraft of the law for public concessions,
loans, modernization of the Instituto Costarricense de Electricidad,
opening the telecommunications market to competition, strengthening the
Instituto Nacional de Seguros and opening the monopoly in the insurance
market.

The government estimates that the country has a debt load of $7
billion. For every colon that flows into the Ministerio de Hacienda,
the government spends two colons, financing the difference with debt.

The Central Bank itself has run up $2.8 billion in debt defending the
value of the colon over the years. The central bankers want to hand
this debt over to the central government, where there are more options
for financing. Such a measure is in the legislature.

Officials at the Central Bank have begun talking about letting the
colon float on the world market within certain limits by the end of the
year. This possibility has caused concern in the expat community and
would amount to a dollarization of the Costa Rican economy because
hardly anyone would accept colons if they did not know what the
currency would be worth tomorrow.

Recent disclosures of special benefits given public employees have
irked some in the public. For example, a guard with 31-years of service
on the docks at Caldera is getting a $26,000 payoff because the
facility is being turned into a concession. The payoff is in addition
to any pension benefits.

Similar disclosures were prompted by Sala IV rulings rejecting some
benefits. The court acted on appeals filed by the Movimiento
Libertario. There also have been disclosures that President
Pacheco
funneled millions in cash through the Catholic Church to Limón
dockworkers to buy labor peace. The church then was reimbursed by
"donations" from owners of agricultural firms who had received
settlements for storm damage to their crops.

A legislative commission will investigate why employees of the foreign
ministry got special pay provided by the government of Taiwan.

The Comisión Permanente Especial de Control del Ingreso y Gasto
Público decided Monday to looking into the payments at the
Ministerio de Relaciones Exteriores y Culto.

Until at least October 2004 the executive branch made payments from a
special fund, the Asociación para el Desarrollo de la
Política Exterior de Costa Rica, to foreign ministry employees.
The money originally came from the government of Taiwan.

Alberto Salom Echeverría, a legislator affiliated with the
Partido Acción Ciudadana, was the lawmaker who initiated the
commission action. He said that he had met with current foreign
minister, Bruno Stagno, who promised to provide him with all the
documentation, he said.

The payments were made during the administrations of Miguel
Ángel Rodriguez and Abel Pacheco. They are members of the
Partido Unidad Cristiana. The administration had argued that foreign
ministry employees deserved the money because of the sensitive nature
of their jobs.

Salom said that the payments might have continued longer — even while a
law against illegal enrichment came into force. He said there were no
external controls on the use of the money. The commission has the power
to summons witnesses and documents.

Anti-corruption measures
to be studied in Managua

Special to A.M. Costa Rica

During a national workshop that will take place today in Managua,
Nicaragua, high-level representatives of the Nicaraguan government and
the Organization of American States will study measures designed to
implement recommendations for strengthening anti-corruption efforts in
the country.

The event, which will include the participation of the president of
Nicaragua, builds on the Inter-American Convention against Corruption.
Through this process, experts from the hemispheric member states
examine progress against corruption in each country and develop
concrete recommendations to improve efforts to combat this problem.

The Managua workshop will take place at the Hotel Intercontinental
Metrocentro and begin at 8:30 a.m.
Nicaraguan President Enrique Bolaños will take part in the
closing session, scheduled for 4:45 p.m., and he will be briefed on the
results and conclusions of the workshop.

Some 28 organization member countries participate in the
anti-corruption mechanism. Last week, the first Hemispheric Report
developed through this process was presented to the region’s foreign
ministers, who were meeting in Santo Domingo, Dominican Republic, for
the organization's annual general assembly.

Arias says corporate rate
will be just single digit

By the A.M. Costa Rica staff

President Óscar Arias Sánchez told Germans over the
weekend that foreign firms soon would only have to pay a tax rate here
in the single digits.

He was speaking in Munich at the Costa Rica Arena, an exposition area
of the country's products set up for the World Cup crowd. Arias pointed
out that a magazine had listed Costa Rica third in the world in
outsourcing after India and China.

"In fact, our salary structure is more competitive than that of India
and the tax rate in force for foreign corporations soon will be a
single digit," said Arias in a Spanish text released by Casa
Presidencial. The corporate tax rate here is typically 30 percent.

Arias did not say how the low tax rate might be accomplished. However,
he said that during his administration there will be more and more aid
to foreign investment.

He said that he hoped an accord would be reached soon with Europe to
eliminate import duties and that his aides are sending proposed laws to
the Asamblea Legislativa to stimulate the growth of the high-tech
sector. More importantly, he said, the amount of money for education is
being increased.

Bids sought on four bridges

By the A.M. Costa Rica staff

The state highway agency says it will seek bids for four bridges
destroyed by floods last year along the Pacific Coast. The bid deadline
is July 7.

The bridges will be over the rios Portalón, Matapalo, Hatillo
Nuevo and Hatillo Viejo.

The agency, the Consejo Nacional de Vialidad, has had trouble getting
the money and approvals for the work.

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After years of living in the dark ages, high speed Internet has finally
come to the seaside village of Cahuita on Costa Rica’s Caribbean
coast. The community might be the first in Costa Rica to be
covered by what is called a wireless cloud.

Until now, Internet users have had only one way to get online — through
a dial-up service at a maximum speed of 56 kbps.

Radiográfica Costarricense S.A. provided that service. The
company is a subsidiary of the Instituto Costarricense de
Electricidad, the government-owned telecommunications monopoly.

Now users with their own laptops can go online using wireless or WiFi
technology provided by the newly opened Jungle Internet
Café. Customers using the café’s computers have
access to the same technology. The Jungle Café is the
second opened on Costa Rica’s Caribbean coast by California couple
Jimmy Brake and his wife, Linda Lee, and their partner, Colombian
Nicolay Bent de Armas. The first café has been operating
in Puerto Viejo de Talamanca since February last year.

De Armas explained that the technology begins with a satellite
dish. The dish brings the Internet connection to a server for all
the computers in the Café and an antenna provides the signal to
other nearby computers that have wireless capability, he said.

Currently the signal extends 400 meters (about 1,300 feet) from the
café which is located in the center of Cahuita across from the
city park and above the Restaurant Coral Reef. The coverage may be
expanded later by adding repeaters throughout the area. The speed is a
hefty 400 kbps compared to the 56k of a dial-up connection. Speed in
Puerto Viejo runs higher at 1,000 kbps, de Armas said.

Brake and Lee have been coming to Puerto Viejo for two to three months
each year for several years. In their hometown of Oakland,
California the couple operates DW Alliance, a web-based technology
company, from their home and liked the idea of

These Internet users are in the cafe, but they could be 400
meters away instead.

A.M. Costa Rica
photos/Annette Carter

Jimmy Brake and Nicolay Bent de Armas at their new Jungle
Internet Café in Cahuita.

working from the Caribbean for part of the year. But
they soon found it wasn’t so easy.

Users buy increments of time from 15 minutes to 10 hours which is
metered on the Web site and can be used from either Jungle Café
location or on a personal laptop computer.

The Instituto Costarricense de Electricidad is starting to offer high
speed DSL internet access known as Acelera to residents of
Cahuita.
The service connects at speeds ranging from 128 kpbs to 4,096 kbps and
costs from $28.25 to $327.70 per month depending on the plan purchased.
The hookup requires a land-based telephone line and a special modem for
the computer.

Several businesses in the Central Valley provide wireless systems for
commercial customers. However, Cahuita is small enough to be covered by
a single setup.

Elsewhere, whole U.S. counties are covered by wireless clouds that
allow computers with wireless access to get on the Internet anywhere.“We couldn’t run our business from here because the Internet
was really
really slow,” Brake said. “And we met other people who were in the same
boat.”

A systems engineer, Brake knew what needed to be done. At about
that
time, de Armas who moved to the Caribbean coast from the Colombian
island of San Andreas two years ago had been working in computer
maintenance for a dial-up Internet café in Puerto Viejo and
began to
think of opening his own operation using faster technology but he
needed a partner.

The two met each other and hit if off, Brake said. Now de Armas
handles all the management and day to day operations while Brake takes
care of the Web site from California. “Our plan is to unite
Cahuita,
Puerto Viejo and Manzanillo with WiFi,” said de Armas. Brake said
they
expect to open the third Jungle Café in Manzanillo in the fall.

Stolen
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Desamparados Saturday faternoon1991 Nissan four-door sedan
Plate No. 571158Color blue
Last seen traveling Sunday from Guadalupe to Hatillo
If seen, call 911. Do not approach.

The regional ambitions of Venezuelan President Hugo Chávez
appear to have suffered a setback in Peru with the defeat of a
presidential candidate backed by the leftist Venezuelan leader. Still,
the past record of election winner Alan Garcia is cause for concern for
Peru's economic partners like the United States and China.

Peruvian president-elect Garcia says his election is a clear defeat for
Chávez, who had openly backed Garcia's opponent. “The majority
of the country has defeated the efforts by Hugo Chávez to
integrate us into his militaristic and backwards expansionist project
he intends to impose over South America," Garcia said.

Garcia's rival, Ollanta Humala, called for a social revolution and
campaigned against what he considered to be the exploitation of Peru by
free market policies.

Humala was supported by Chávez who openly backed a presidential
election victory by Evo Morales in neighboring Bolivia last December.
Appearing in Bolivia with Morales recently, the Venezuelan leader
disparaged Garcia and promised economic support for Peru if Ollanta
Humala won the election.

By doing this he may have overreached according to Michael Shifter of
the private Inter-American Dialogue organization in Washington,
DC. "Peruvians don't like people meddling in their politics, and
they don't like it whether it is Venezuelans, or Americans or anybody
else," he said.

Chávez has steered his country leftward since taking office in
1999. He has used its vast oil wealth to expand his influence while
denouncing the United States. Peru's election results may signal
the beginning of a Latin American backlash against the Venezuelan
leader.

"What we're seeing now
is that he has reached his limit, perhaps. I
think there is a reaction in the rest of Latin America,” Shifter said.
“Clearly he's a leader with a lot of resources, and governments want
his resources, but they are not prepared to defer leadership to him."

Garcia's populist policies as president from 1985 to 1990 led to
economic stagnation and runaway inflation.

That is why countries with trade and investment in Peru, such as the
United States and China, are expected to watch Garcia closely to see if
he goes back on his campaign promises not to make the same mistakes
again.

Peru's vast tropical forests, its booming mining industry and rich
fisheries have attracted trade and investment from China. Beijing is
increasingly looking to Latin America for raw materials to fuel its
manufacturing industries. Last year, China imported $50 billion worth
of commodities from Latin America, a six-fold increase since 1999.

In his presidential campaign, Garcia, a moderate leftist, promised to
preserve Peru's free trade economy. Shifter said he believes the
incoming president will not follow Bolivia's example of nationalizating
industries.

"I think Garcia has given all the signals that he is not
going to make significant changes in the current investment environment
in Peru,” Shifter said. “There may be some re-negotiations on the
edges, but he has made it clear that what has happened in other
countries, like Bolivia, is not a model that he wants to follow."

Peru's rampant poverty and underdevelopment will pose a challenge to
Garcia as he tries to respond to the country's social demands while
maintaining fiscal responsibility.

U.S. team falls to Czechs in first World Cup game

By the A.M. Costa Rica wire services

GELSENKIRCHEN, Germany — The U.S. Soccer team got off to a rocky
start in the 2006 World Cup here, losing to the Czech Republic, 3-0.

Very little went right for the U.S. team from the outset of the match
against the Czech Republic. Defender Oguchi Onyewu was given a yellow
card for a foul in the fourth minute, and barely one minute later the
Czechs had a 1-0 lead on a perfectly placed crossing pass that Jan
Koller headed in the net.

Tomas Rosicky added goals in the 36th and 76th minutes, one on a
powerful shot from several meters outside the box and another on a chip
shot over the head of U.S. goalie Kasey Keller after he sped past the
defense.

U.S. coach Bruce Arena said he was not pleased with his team's effort.

"Certainly a very poor start to the game," said Bruce Arena. "And to
put yourself down a goal in the first five minutes of the game against
a team of the quality of the Czech Republic that actually defends quite
well. At that point we're very comfortable in sitting back

and absorbing any kind
of pressure encountering us. We were really
behind the eight ball from the start, so I'm very disappointed in our
start. I'm very disappointed in the performance of a number of our
players over 90 minutes."

The best chance the U.S. team had to score came in the 28th minute when
a shot by captain Claudia Reyna bounced out after hitting the inside of
the left post.

In the 3-0 victory, the Czechs saw their star forward, Jan Koller, go
down with a leg muscle injury just before the half and he left the game.

Because of that, Czech coach Karel Brucker was a bit subdued after the
win.

"It's obviously a very nice feeling to have won the first match," said
Brucker. "However, we are going to suppress our over-satisfaction
because there are two tough matches ahead of us, and we also suffered
heavy losses, so to say."

After the 3-0 Group E win over the USA, the Czech Republic will face
Ghana Saturday in Cologne and the United States will take on Italy in
Kaiserslautern.

European Union declines to reinstate sanctions against Cuba

By the A.M. Costa Rica wire services

The European Union has adopted a new strategy on Cuba, but has
postponed the renewal of sanctions for another year.

EU foreign ministers Monday deplored the state of human rights on the
Communist island and urged Havana to free all political prisoners. But
the diplomats did not reinstate the sanctions that were suspended in
January 2005.

Support for a tougher
stance on Cuba was strongest among new EU members
from Eastern Europe who still live with the legacy of communism. Sweden
and the Netherlands also were in favor of a tougher policy.
Cuba's colonial ruler, Spain, was among the countries opposing the
renewal of sanctions.

The declaration concludes that the European Union would welcome renewed
political dialogue with Cuban authorities. The ministers are expected
to review the situation on Cuba again next year.

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